India stands on the precipice of a significant economic transformation, as its nascent but rapidly expanding electronics industry is poised to emerge as a formidable co-engine of growth, challenging the long-dominant IT services sector. Projections indicate a remarkable convergence by 2030, where both industries are anticipated to contribute an equal share of $500 billion each, collectively propelling India’s digital economy to an ambitious $1 trillion valuation. This strategic shift underscores a broader national imperative to diversify economic strengths, move up the global manufacturing value chain, and bolster indigenous capabilities in an increasingly digital world.
The momentum behind the electronics sector is nothing short of extraordinary. Having concluded the previous fiscal year with revenues of $125 billion, the industry is projected to achieve a compounded annual growth rate (CAGR) of an impressive 32% over the next five years. This blistering pace significantly outstrips the anticipated growth of the more established IT services sector, which, despite recording a substantial $283 billion in revenue last year, is forecast to expand at a more modest 12% annually to reach the same $500 billion milestone. This disparity in growth rates highlights a deliberate policy push and a dynamic market response, signaling a strategic rebalancing within India’s high-tech landscape. As S Krishnan, Secretary at the Ministry of Electronics and Information Technology (MeitY), articulated, while the electronics industry is still comparatively younger and smaller than its IT counterpart, the overarching goal is to foster rapid growth in both domains, ensuring India’s robust position in the global digital arena.
A pivotal catalyst for this accelerated growth has been the Indian government’s proactive policy interventions, most notably the Production Linked Incentive (PLI) schemes initiated in April 2020. These schemes offered financial assistance and incentives for the domestic manufacturing and assembly of mobile phones and a broader range of electronic goods. The impact has been transformative, attracting substantial foreign direct investment and fostering a vibrant domestic ecosystem. In a short span, the sector has witnessed the emergence of over half a dozen publicly listed firms, numerous private enterprises, and a significant influx of global manufacturing giants. Taiwanese conglomerate Foxconn, for instance, along with other major players, has either established new facilities or expanded existing operations to leverage India’s growing manufacturing capabilities, initially focusing on the assembly of imported components.
The tangible success of these policies is evident in the performance of key industry players. A consortium of four prominent listed electronic component makers—Dixon Technologies, Amber Enterprises, Kaynes Technology, and Syrma SGS—collectively reported revenues of $6.1 billion in the last fiscal year. Concurrently, privately held Tata Electronics, a relatively new entrant, posted an impressive $7.4 billion in revenue, demonstrating the scale and ambition of domestic enterprises. This surge is not merely a reflection of internal economic dynamics but also a strategic response to evolving global supply chain paradigms. Ankush Wadhera, Managing Director and Partner at Boston Consulting Group, noted that India has emerged as a highly favored destination for the global electronics supply chain, driven by geopolitical considerations and a strategic imperative for diversification away from traditional manufacturing hubs in China, Taiwan, Malaysia, Thailand, and Vietnam. The attractive policy support and agile decision-making by both central and state governments are prompting numerous international firms to formulate their "India strategy," seeking resilience and new growth avenues.
Beyond mere assembly, India’s strategic vision extends to deeper localization and value addition. The MeitY’s Electronics Components Manufacturing Scheme (ECMS), slated for implementation through 2025, is designed to incentivize the local production of individual phone and computer components. This initiative aims to propel companies like Tata Electronics, Foxconn, and Dixon up the value chain, fostering greater domestic content and reducing reliance on imports. This transition is critical for enhancing revenue substantially in the long run, positioning India as a comprehensive manufacturing hub rather than just an assembly point. Furthermore, this strategic pivot in electronics is also viewed through the lens of potential shifts in the IT services sector, where advancements in AI-led automation may necessitate a recalibration of growth drivers, making a robust manufacturing base even more crucial for overall economic stability.
However, the rapid ascent of the electronics sector also brings into focus disparities with the mature IT services industry. While growth rates are high, the electronics sector remains smaller in terms of overall employment, engaging approximately 2.5 million people compared to IT’s 5.8 million. Salary structures also reflect this nascent stage, with electronics engineers earning an average of ₹1.8 lakh per year, significantly lower than the ₹3.5 lakh average in IT services. Furthermore, initial margins in electronics manufacturing are often razor-thin, and profitability can be elusive in the early stages. For instance, Tata Electronics, despite its substantial revenue of ₹66,601 crore, reported losses of ₹69 crore, a stark contrast to the robust free cash flow of ₹46,450 crore generated by Tata Consultancy Services (TCS), the venerable crown jewel of the Tata Group.
These financial characteristics are typical of capital-intensive manufacturing industries in their growth phase, which require substantial upfront investment in infrastructure, machinery, and R&D before achieving economies of scale and profitability. MeitY Secretary S Krishnan underscored the nuanced reality of employment in this sector. While factory jobs in electronics manufacturing may offer lower salaries compared to highly specialized tech roles, they represent a significant step up from agricultural or informal sector employment. These positions often come with benefits such as housing and employee protection, creating opportunities that previously did not exist for a large segment of the workforce. As the industry matures and moves towards higher-value activities like component manufacturing, design, and research, it is expected to generate a greater demand for skilled engineers and higher-paid positions.
The strategic imperative to foster local champions and reduce dependency on global supply chain volatilities is strongly advocated by industry veterans. Ajai Chowdhry, co-founder of HCL and founder of the electronics industry body Epic Foundation, emphasized the need to channel government incentives towards building robust domestic enterprises, especially in components and semiconductors. He highlighted electronics as a crucial employment generator, while also clarifying that the IT services sector, though facing a potential "blip" due to technological shifts, is far from becoming obsolete. The sustained growth of captive centers and specialized software services continues to uphold the sector, ensuring its steady expansion alongside the burgeoning electronics industry.
Looking ahead, India’s vision of a $1 trillion digital economy hinges on the successful orchestration of both these powerful sectors. The electronics industry, with its emphasis on tangible production and mass employment, offers a crucial counterweight to the service-oriented IT sector. As India seeks to establish itself as a global manufacturing hub, alongside its established prowess in software and services, it must address critical challenges such as further enhancing infrastructure, ensuring a resilient and localized supply chain for high-end components, investing heavily in research and development, and bridging the skill gap through targeted vocational training. The synergy between IT and electronics—where software drives smart manufacturing, IoT, embedded systems, and AI applications within factories—will be paramount. By nurturing both its software intelligence and hardware manufacturing capabilities, India is not just pursuing economic growth but strategically positioning itself for geopolitical relevance and self-reliance in the global digital age.
